Two New Studies Highlight Impact of Minnesota Tobacco Tax increase


Two recently published studies provide findings about the impact of the substantial 2013 Minnesota tobacco tax increase.

The first study measured the tobacco industry response to the tax increase.  Results are published in Tobacco Control (Brock B, Choi K, Boyle RG, Moilanen M, & Schillo BA. January 6, 2015) in a paper titled “Tobacco product prices before and after a statewide tobacco tax increase.” This paper shares results from an observational study investigating tobacco product prices in a sample of 61 convenience stores in Minnesota, North Dakota, South Dakota, and Wisconsin before and after the tobacco tax increase. After the tax increase, tobacco prices in Minnesota increased significantly.  Significant price changes were not observed in the comparison states.  For cigarettes, Minnesota prices increased by more than the amount of the tax increase, suggesting the tobacco industry increased its prices on top of the tobacco tax increase. This practice is called over-shifting.  Other studies have observed over-shifting.  It is thought that tobacco companies take advantage of tobacco tax increases by increasing their prices at the same time and blaming the entirety of the price increase on “the government.” Most often, they increase their prices by a small amount per pack. This small amount helps profits while not substantially impacting the overall price. In-store price promotions were commonly observed during the study period.  However, even after accounting for these price promotions, cigarette prices still increased by more than the amount of the tax increase.  This suggests that tobacco companies might be using in-store price promotions as a PR move rather than a mechanism for true price savings.

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The second study measured consumer purchasing patterns after the tax increase.  Results are published in The American Journal of Public Health (Amato MS, Boyle RG, & Brock B) in a paper titled “Higher price, fewer packs: Evaluating a tobacco tax increase with cigarette sales data.”  This study found a significant decrease in the number of cigarette packs sold in Minnesota after the tax increase. The results provide contemporary evidence that tobacco tax increases remain an effective tobacco prevention strategy.

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